Big Fish in Small Ponds: Human Capital Migration and the Rise of Boutique Banks

Janet Gao (), Wenyu Wang () and Xiaoyun Yu ()
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Janet Gao: McDonough School of Business, Georgetown University, Washington, District of Columbia 20057
Wenyu Wang: Kelley School of Business, Indiana University, Bloomington, Indiana 47401
Xiaoyun Yu: Shanghai Advanced Institute of Finance, Shanghai Jiao Tong University, Shanghai 200052, China

Management Science, 2024, vol. 70, issue 11, 7829-7850

Abstract: We study the comparative advantage of firms with focused and multidivisional organizational forms at attracting valuable human capital. Using the merger and acquisition (M&A) advisory industry as a laboratory, we show that high-performing individuals are more likely to migrate to boutique (focused) banks, especially those who are still on the upward trajectory of their career. Such migration is amplified by the cross-subsidization inside bulge bracket (multidivisional) firms, proxied by poor performance of their non-M&A departments. The transition of skilled labor improves the performance of the boutique sector, potentially contributing to the rise of boutiques over the past two decades. Moreover, M&A deal outcomes differ when having boutique advisors. Our findings suggest that corporate organizational structure and labor migration can jointly shape industry dynamics.

Keywords: investment bank; mobility of human capital; mergers and acquisitions; organizational friction (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:70:y:2024:i:11:p:7829-7850

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